Monday’s sudden drop in live cattle futures may have been at least partially linked to misinformation, and a recovery of sorts may be in the offing Tuesday, although it may turn out to be short-lived.
A preliminary report of the USDA-Agricultural Marketing Service’s five-market average cash price last week was below the actual USDA-AMS number, likely leading some to think that more cattle had traded around $130 to $131 per cwt on a live basis than was actually the case.
Cash fed cattle prices did take a tumble last week, resulting in Monday’s quick limit-down move in the futures market with calls for further declines in Tuesday’s expanded-limit session.
THE SCENARIO
Cash cattle traded in the Plains late Friday and into Saturday in a range from $130 to $136 per cwt on a live basis, down $2 to $7 from the previous week. What made this so disappointing, and such a surprise, to futures traders was the timing, the packer bids that went before the bulk of the trade and the apparent volume that traded at the lower end of the range.
Bids from packer buyers started the week in the low $130’s but drew no interest from cattle sellers who were asking around $140 up to $142. Bids rose at midweek to $136 with some up to $138 and drew no takers.
However, packer bids inexplicably dipped to $136 late in the week, drawing a few sellers. Other sellers were not willing to follow suit, and many analysts assumed they would hold storm-stressed cattle to recover some weight before being sold for slaughter.
Reports late Friday and early Saturday that some in Nebraska had sold as low as $130 surprised analysts, but it was assumed that these prices were from widely scattered, small-lot trades of low-quality cattle.
But when a prominent market reporter reported the USDA-AMS preliminary 5-market average fed cattle price at $132.20 per cwt, down $4.14 from $136.36 the previous week, it was apparent that many more had traded at the lower numbers than was first assumed. Some of this information apparently had filtered into futures traders’ hands by early Monday causing the gapped-lower open.
THE REALITY
The actual USDA-AMS five-market average fed steer price of $134.46 per cwt on a live basis came out later in the morning, but the market hardly noticed. It’s very possible that some took note after the heat of Monday’s locked-limit-down trading session cooled. This could result in a “turnaround Tuesday” where prices on Tuesday turn from a sharp Monday move and regain much or all of Monday’s price move.
The dip in the five-market average price is hardly apparent on a graph. This year’s weekly prices so far are holding above the 2010-2014 average and well below last year.
They also are following the seasonal trend higher toward a late-March peak when more cattle typically become available for slaughter.
CASH CATTLE QUIET
Cash cattle markets this week remain undefined. No bids or offers were reported yet, and last week’s trading range was so wide that it’s difficult to make semi-accurate guesses about initial numbers.
Feedlot showlists appear to be larger in all major feeding states except Nebraska and could lend some pressure to prices.
The USDA reported mixed wholesale beef prices Friday, with choice up $1.79 per cwt at $218.81, and select up $0.07 at $216.58. The choice/select spread narrowed to $2.23 from $4.09, and there were 91 loads of fabricated product sold into the spot market.
The CME Feeder Cattle Index for the seven days ended Friday was $160.15 per cwt, up $0.48. This compares with Mar’s Monday settlement of $149.32, down $4.50.